The financial recovery of companies engulfed by the crisis is neither an easy nor a quick process.

The study also registered a 9.5% increase in indebted companies compared to the previous year.

But it is possible to get out of the red.

Then you ask … How to start the financial recovery of the business, then?

To resume the company’s financial health, the first step is to anchor itself on two pillars: planning and strategy.

In this article, you will follow some tips on how to recover your company’s financial health and get out of the crisis once and for all. Follow below!

5 steps to start the financial recovery of your business

To keep the company open with a financial crisis, it is necessary to be a good chess player or, in other words, a born strategist.

Sometimes, the best alternative is to invest to start the recovery of companies. But there is no correct formula; it all depends on the situation and the history of the business.

Let’s go a step by step to start financial recovery!

Step 1 – Do a financial planning

The first step in starting the company’s financial recovery is to do financial planning.

In planning, you will identify the financial situation of the business, the problems that are putting the operation at risk and, finally, outline strategies to solve them.

The question that should guide the financial diagnosis is:

What is preventing my company from growing?

It is common to see companies spending more than they raise or having insufficient revenue to meet short-term obligations. In the recovery plan, actions will be outlined that can be taken to get out of the financial crisis.

A good alternative for identifying the cause of the problem is to start by analyzing the cash flow and assessing where the money is going.

Step 2- Review the options

Depending on the problem that caused the financial difficulties, the options for dealing with them vary.

But some measures can be taken such as:

  • Decrease the size of the business
  • Make improvements / diversify the products and services offered
  • Cut off expenses
  • Expand your business to other locations
  • Change branch
  • Close the doors

Note that recovering the company’s financial health may require a certain investment.

But before investing your money, keep in mind that you need to conduct a business analysis. In this analysis, you will make a projection of what the company produces and what it will be able to produce in terms of capital.

This will help to decide if it is worthwhile to continue investing in financial recovery or if closing activities would not be the best way out of contracting more debt.

The assessment can also bring totally different views, identifying the possibility of even seeking credit for working capital.

See this post and discover 9 tips to reduce your company’s financial difficulties.

Step 3- Perform a debt restructuring

One of the most pressing problems facing companies is not having the resources available to meet financial obligations.

Hence the importance of a corporate restructuring: put all debts on paper or spreadsheet, then classify and study which ones should be prioritized, either by degree of importance or weight of interest.

The salaries of employees, suppliers and taxes are some examples. On the other hand, it is necessary to determine the debts that will not be paid now, also the liabilities that will be renegotiated, a possible reduction in the staff and even a revision in the pricing of products and services.

It is important to evaluate the results obtained with these measures from time to time and to devise new strategies. Depending on the results, the company will need to resort to a judicial reorganization process.

If you are in doubt when it comes to prioritizing payments, consider the following aspects:

  • If your business depends on raw materials or goods for resale to continue generating revenue, prioritize suppliers.
  • If the company sells to governments and depends on bids, you must pay tax debts.
  • If your company has a lot of labor lawsuits and has contracted several debts with financial institutions, you need to focus on this so as not to run the risk of compromising business assets and resources.
  • Always take into account the financial volume per creditor, as many will have more costs associated with interest and penalties. Also note lenders with higher interest rates.

Remembering that in order to decide which debts will be prioritized, it is essential to have a qualified professional who understands the subject.

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Step 4- Renegotiate debts

After putting all debts on paper and prioritizing them, it’s time to renegotiate with creditors. Here you should know in advance how much you will have per month to pay off the debt.

The ideal time to renegotiate is before the debts mature, as creditors are more sensitive to your difficulties.

Step 5- Reduce costs

While you are renegotiating the debt, evaluate everything that can be cut in the company. This cost cut must be significant, from the smallest to the largest debts. This will help the company have more cash on hand to cover short-term expenses.

Step 6- Reassess the measures taken

After reducing costs, renegotiating, how was the business? Did you notice any positive changes? What options are still left? Did the lender offer any good proposals?

With the adjustments made, is it possible to commit to this? Or is it necessary to take more drastic measures, such as firing employees, changing branches or ending activities? It is time to reflect and re-evaluate everything that has been done so far.

Step 7- Put your action plan into practice

Regardless of the latest definitions, it is necessary to anchor on good strategies to get out of the crisis and restore financial health.

Remember the planning stage, when you identified the problems and established actions that would be taken? It’s time to put the action plan into practice!

But remember: it is not enough to take action and leave the boat. You must always be monitoring the results and making adjustments when necessary.

In this article, you have followed a step-by-step guide to how to start your business’s financial recovery: identify the problems, analyze the alternatives and execute a plan to get out of the crisis.

Following these tips, we believe it is possible to start to regain financial health and get out of the red, but always keeping control of finances, huh?


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